Judge blocks governor's money plan

Day-to-day state bills can't be paid from special funds, he says

March 12, 2005|By Rick Pearson, Tribune political reporter.

A Downstate judge Friday issued a preliminary injunction blocking Gov. Rod Blagojevich from paying day-to-day state bills with money siphoned from special state accounts earmarked for the regulation of financial institutions.

The state has hundreds of such funds, filled by special assessments and fees, that were set up to bankroll conservation programs, scholarships, financial regulation and a variety of other narrow missions.

But Blagojevich, with legislative backing, has drawn more than $400 million out of the special accounts over the last 18 months to pay day-to-day bills of government, ease the state's cash crunch and avoid a general tax increase. In his budget for the coming fiscal year, Blagojevich proposes to tie all increases in spending for schools to the so-called fund sweeps.

The ruling by Sangamon County Circuit Judge Leo Zappa affected only three of the special funds, from which Blagojevich has taken $5 million. But it raised new questions about whether any of Blagojevich's fund diversions could pass legal muster.

Zappa acted in a case brought by banking industry groups that contend the diversions violate the state Constitution.

It came just days after state Treasurer Judy Baar Topinka announced she would no longer approve Blagojevich administration orders to transfer money from the special funds to the state's general checkbook because of concerns the maneuver may be illegal.

The Blagojevich administration maintains the transfers are legal and only involve surplus dollars being held in the special bank accounts.

"Judge Zappa's ruling validates my concerns about the fund transfers and should serve as a wake-up call to the governor that a more reasoned and prudent approach should be taken," Topinka said in a statement.

But Becky Carroll, a spokeswoman for Blagojevich budget director John Filan, said the injunction "has no bearing on the merits of the case" and that the administration had not counted on transfers from the affected funds until the court made a decision.

In issuing the injunction, Zappa said the improper expenditure of fees paid by the financial institutions for use in paying general state obligations "may jeopardize the statutory regulatory system and prevent the regulators from discharging their duties, which inflicts irreparable harm."